Policy Changes Resulting from the Tax Cuts and Jobs Act

Worldwide ERC® continues to monitor the impact of the Tax Cuts and Jobs Act on talent mobility programs and policies.

Since enactment of the Tax Cuts and Jobs Act (TCJA), which suspended the deduction/exclusion for moving expenses and made a number of other changes to the tax law that affect mobility, Worldwide ERC® has conducted three on-line pulse surveys in which it asked members how the changes had affected things such as move volumes and gross-ups.

The first was completed in September of 2018, prior to the 2018 Global Workforce Symposium in Seattle, WA. Results of that survey were published on Worldwide ERC®’s website in early December of that year, and can be found here.

Since that time, Worldwide ERC® has conducted two additional pulse surveys, one in April of 2019 devoted primarily to the effect of the TCJA on gross-up policies, and another in September of 2019 with questions related to move volumes, gross-ups, and other issues. Those results were discussed at meetings of the Worldwide ERC® Tax Forum in Atlanta in May of 2019, and Boston in October of 2019.

The 2019 survey results reveal ongoing reexamination of relocation policies, with a number of departures from the results of the earlier 2018 survey.

First, a note as to the respondents. The 2018 survey and the April 2019 survey were sent to corporate members of Worldwide ERC®. Seventy-four members responded in 2018, and 59 in 2019. The September 2019, survey was sent not only to corporate members, but to service provider members. One hundred seventy-three members responded to that survey, of whom 73 (42%) were corporate members with the rest split about evenly between relocation management companies and other service providers. Consequently, the number of corporate responses has been consistent in all three surveys.

Move Volume

2018

Volume about the same:

78%

Slight decrease:

15%

Significant decrease:

3%

2019 (September)

Volume decreased:

90%

Decrease was slight:

70%

Significant decrease:

20%

Significant increase:

7%

Slight increase:

3%

First, a note as to the respondents. The 2018 survey and the April 2019 survey were sent to corporate members of Worldwide ERC®. Seventy-four members responded in 2018, and 59 in 2019. The September 2019, survey was sent not only to corporate members, but to service provider members. One hundred seventy-three members responded to that survey, of whom 73 (42%) were corporate members with the rest split about evenly between relocation management companies and other service providers. Consequently, the number of corporate responses has been consistent in all three surveys.

The latter changes are illustrated by responses to a question on the September 2019 survey. Worldwide ERC® asked “has your organization updated any of the following program/policy elements as a result of the TCJA of 2017?”

Policy Component

Yes

No

Distance duration, or time requirements:

12%

30%

Householde goods shipments:

71%

21%

Duplicate housing support:

12%

25%

Mortgage assistance:

6%

25%

These responses suggest that most companies have made at least some changes to their relocation policies, and it is likely that additional changes will occur as experience with the TCJA continues to evolve.

Lump Sum Programs

In both the 2018 survey, and the September 2019 survey, respondents were asked if they had either increased the use of lump sum programs or were considering it.

2018 (September)

Increased:

18%

Not increased:

59%

Under review:

23%

2019 (September)

Increased:

76%

Not increased:

24%

This would represent a meaningful change in policy direction. Many observers speculated that use of lump sum programs would increase after the TCJA, and it does appear that one of the policy adjustments many companies are making is to increase their use of such programs.

Gross-ups

Worldwide ERC® asked questions related to gross-ups in all three surveys.

In 2018, members were asked whether they were changing their gross-up policies as a result of loss of the moving expense deduction/exclusion. The results were as follows:

Yes:

36%

No, but policies under review:

17%

No:

47%

By April of 2019, 61% said they had updated their gross-up policies, while 39% said they had not. In addition, 29% reported a greater than usual number of requests to adjust gross-up amounts, with the majority saying that the requests resulted from shortfalls in federal tax gross-ups (67%), and 6% reporting state gross-up issues. The latter was reported as being due to the delays and uncertainties resulting from state conformity issues.

In the latest survey in September of 2019, 53% said they had updated their gross-up policies with 47% reporting they had not. However, 30% said they were planning to update the policies, and another 28% said they were considering it.

Asked what policy elements had been changed, the responses were as follows:

Eliminated gross-ups for household goods shipments:

4%

Eliminated some state level gross-ups:

8%

Provided fewer gross-ups:

4%

Provided fewer gross-ups:

27%

Changed the income that is considered:

38%

Changed handling of gross-up requests:

19%

Changed policies for states that do not conform:

27%

These responses illustrate that companies have adopted a wide variety of changes to their gross-up policies, with most continuing generally to provide gross-ups but altering some of the ways they do so to control costs.

Use of TCJA savings

Finally, Worldwide ERC® asked members whether their companies were using any of the company tax savings from the TCJA to augment or support their relocation budgets. The results were as follows:

2018

Yes:

8%

No:

81%

Policies under review

11%

2019(September)

Yes:

5%

No:

69%

Not sure:

27%

This might suggest that companies are in fact not devoting tax savings to relocation. However, it could also be that budget enhancements have not always been made clear to the personnel conducting those activities.

How this Wil Impact Mobility

The survey responses of Worldwide ERC® members suggest that the industry is continuing to adapt to changes occasioned by the TCJA, with most companies continuing to move employees and gross them up for taxable costs but adjusting to some extent either the number of relocations or the scope of benefits to maintain control of costs. The relatively modest extent of changes illustrates the continuing importance of employee mobility to the businesses of Worldwide ERC® members.